A Different Kind Of Joint Problem
Parents who intend to transfer their assets into joint names with some or all of their adult children need to carefully consider that decision before implementing the transfers. A series of recent Court cases in Western Canada highlight the need for careful legal advice when parents are considering such transfers in the context of estate planning or family business operations.
In Canada, ownership of property as a joint tenant carries with it the right of survivorship. In simple terms, it means that the joint owner who survives the longest stands to inherit the entire asset. However, in 2007 the Supreme Court of Canada confirmed a general rule that when parents transfer property into joint names with adult, independent children without receiving any consideration in return, the law presumes that on the parent's death, the child holds the property on a resulting trust for the parent's estate. If the surviving child (who stands to inherit the whole property by right of survivorship) can show that the parent's intention at the time of the transfer was actually to gift the property to that child, then they can overcome the presumption. If the child is unable to rebut the presumption, he or she would have to distribute it in accordance with the parent's will or the applicable intestacy rules.
While there are some useful reasons why a parent may want to hold property with an adult child in such a manner, there are a number of potential pitfalls and problems, which the cases below illustrate:
Coates v Coates, 2017 SKQB 303: a mother placed a series of properties in joint names with her four children as part of the family's estate plan. One of the children was financially irresponsible and had a judgment against him for various debts. The creditors registered the judgment against title to the family property, which was ultimately sold to pay out the son's judgment. Seeing the potential for similar actions in the future, the mother asked the children to transfer the properties back to her name alone. All but the financially irresponsible child agreed, and the mother was forced to sue him on the basis that he held the property on resulting trust for her.The Saskatchewan Court of Queen's Bench confirmed that in that province, the Land Titles Act had abolished the presumption of resulting trust. However, the mother had sufficient documentary evidence to prove that she had not intended to immediately gift the property to her children when she placed...
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